The Universal Investment Strategy (UIS) is one of our core investment strategies. It is an evolved, intelligent version of the classic 60/40 equity/bond portfolio. Much like the classic portfolio, UIS holds both the S&P 500 index and bonds. However, UIS can intelligently adapt to current conditions by shifting weight away from stocks in difficult markets and adding weight in bullish markets.

Instead of using simple bond ETF, UIS uses a sub-strategy, called HEDGE, which can choose between different types of safe-heaven ETFs.

The equity/bond (or in our case equity/HEDGE) pair is interesting because most of the time these two asset classes profit from an inverse correlation. If there is a real stock market correction, usually ETFs included in the HEDGE strategy (Treasuries, Gold, etc) are the 'safe' assets where money flows to, providing crash protection.

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Using this definition on our asset we see for example:- The total return over 5 years of Universal Investment Strategy is 66.3%, which is lower, thus worse compared to the benchmark SPY (68.1%) in the same period.
- Looking at total return, or increase in value in of 32.7% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (47%).

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:- The annual performance (CAGR) over 5 years of Universal Investment Strategy is 10.7%, which is lower, thus worse compared to the benchmark SPY (11%) in the same period.
- Compared with SPY (13.7%) in the period of the last 3 years, the annual return (CAGR) of 9.9% is lower, thus worse.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:- Compared with the benchmark SPY (21.4%) in the period of the last 5 years, the volatility of 9.2% of Universal Investment Strategy is lower, thus better.
- Looking at volatility in of 8.9% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (18.7%).

'Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (15.4%) in the period of the last 5 years, the downside deviation of 6.6% of Universal Investment Strategy is smaller, thus better.
- During the last 3 years, the downside risk is 6.3%, which is lower, thus better than the value of 13.3% from the benchmark.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Which means for our asset as example:- Looking at the risk / return profile (Sharpe) of 0.89 in the last 5 years of Universal Investment Strategy, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.4)
- During the last 3 years, the Sharpe Ratio is 0.82, which is higher, thus better than the value of 0.6 from the benchmark.

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Using this definition on our asset we see for example:- The excess return divided by the downside deviation over 5 years of Universal Investment Strategy is 1.24, which is larger, thus better compared to the benchmark SPY (0.55) in the same period.
- Looking at downside risk / excess return profile in of 1.16 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.84).

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Using this definition on our asset we see for example:- The Ulcer Ratio over 5 years of Universal Investment Strategy is 4.44 , which is lower, thus better compared to the benchmark SPY (9.45 ) in the same period.
- Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Index of 5.26 is lower, thus better.

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Which means for our asset as example:- Looking at the maximum drop from peak to valley of -15 days in the last 5 years of Universal Investment Strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (-33.7 days)
- Looking at maximum DrawDown in of -12.2 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-24.5 days).

'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Applying this definition to our asset in some examples:- The maximum days below previous high over 5 years of Universal Investment Strategy is 351 days, which is greater, thus worse compared to the benchmark SPY (351 days) in the same period.
- During the last 3 years, the maximum days under water is 351 days, which is higher, thus worse than the value of 351 days from the benchmark.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Which means for our asset as example:- Compared with the benchmark SPY (78 days) in the period of the last 5 years, the average days under water of 74 days of Universal Investment Strategy is lower, thus better.
- During the last 3 years, the average days below previous high is 102 days, which is higher, thus worse than the value of 101 days from the benchmark.

Historical returns have been extended using synthetic data.
[Show Details]

Allocations and holdings shown below are delayed by one month.

Register now to get the current trading allocations.

- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Universal Investment Strategy are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.